SEC News Digest

ENFORCEMENT PROCEEDINGS

Miami Hedge Fund Adviser Charged For Misleading Investors About “Skin in the Game” and Related-Party Deals

The Commission today charged a Miami-based hedge fund adviser for deceiving investors about whether its executives had personally invested in a Latin America-focused hedge fund.

The Commission’s investigation found that Quantek Asset Management LLC made various misrepresentations about fund managers having “skin in the game” along with investors in the $1 billion Quantek Opportunity Fund. In fact, Quantek’s executives never invested their own money in the fund. The Commission’s investigation also found that Quantek misled investors about the investment process of the funds it managed as well as certain related-party transactions involving its lead executive Javier Guerra and its former parent company Bulltick Capital Markets Holdings LP.

Bulltick, Guerra, and former Quantek operations director Ralph Patino are charged along with Quantek in the Commission’s enforcement action. They agreed to pay more than $3.1 million in total disgorgement and penalties to settle the charges, and Guerra and Patino agreed to securities industry bars.

According to the Commission’s order instituting settled administrative proceedings, fund investors frequently inquire about the extent of the manager’s personal investment during their due diligence process, and many require it in fund selection. Quantek, particularly Patino, misrepresented to investors from 2006 to 2008 that management had skin in the game. These misstatements were made when responding to specific questions posed in due diligence questionnaires that were used to market the funds to new investors. Quantek made similar misrepresentations in side letter agreements executed by Guerra with two sought-after institutional investors.

The Commission’s order also found that Quantek misled investors about certain related-party loans made by the fund to affiliates of Guerra and Bulltick. Because the fund permitted related-party transactions with Bulltick and other Quantek affiliates, investors were wary of deals that were not properly disclosed. In 2006 and 2007, Quantek caused the fund to make related-party loans to affiliates of Guerra and Bulltick that were not properly documented or secured at the outset. Quantek and Bulltick employees later re-created the missing related-party loan documents, but misstated key terms of the loans and backdated the materials to give the appearance that the loans had been sufficiently documented and secured at all times. Quantek and Guerra provided this misleading loan information to the fund’s investors.

According to the Commission’s order, Quantek also repeatedly failed to follow the robust investment approval process it had described to investors in the fund. Quantek concealed this deficiency by providing investors with backdated and misleading investment approval memoranda signed by Guerra and other Quantek principals.

Quantek, Guerra, Bulltick, and Patino settled the charges without admitting or denying the findings. Quantek and Guerra agreed jointly to pay more than $2.2 million in disgorgement and pre-judgment interest, and to pay financial penalties of $375,000 and $150,000 respectively. Bulltick agreed to pay a penalty of $300,000, and Patino agreed to a penalty of $50,000. Guerra consented to a five-year securities industry bar, and Patino consented to a securities industry bar of one year. Quantek and Bulltick agreed to censures. They all consented to orders that they cease and desist from committing or causing violations of certain antifraud, compliance, and recordkeeping provisions of the Investment Advisers Act of 1940 and the Securities Act of 1933.

In the Matter of Gregory D. Tindall

On May 29, 2012, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940 (Advisers Act) and Notice of Hearing against Gregory D. Tindall. The proceedings are based on a judgment of permanent injunction entered by default against Tindall in the civil action entitled Securities and Exchange Commission v. Gregory D. Tindall, et al., Civil Action Number 8:10-CV-02859-JDW-MAP, in the United States District Court for the Middle District of Florida. The judgment permanently enjoins Tindall from violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2) and 206(4) of the Advisers Act and Rule 206(4)-8 thereunder.

In the Order, the Division alleges that Tindall was a managing member of Florida-based Arcanum Equity Fund, LLC (Arcanum) and of Vestium Management Group, LLC, which managed a second Florida-based hedge fund, Vestium Equity Fund, LLC. The Division alleges that the complaint alleged that Respondent selected or approved investments by the hedge funds that were inconsistent with the uses of proceeds specified in the funds’ offering materials. The complaint further alleges that Respondent was aware of or approved transfers of millions of dollars of investor funds to a Canadian corporation he controlled. In addition to deviating from the funds’ stated uses of proceeds, these transfers created an undisclosed conflict of interest between Respondent and the funds’ investors.

A hearing before an administrative law judge will be scheduled to determine whether the allegations in the Order are true, to provide the Respondent an opportunity to respond to these allegations, and to determine what, if any, remedial action is appropriate in the public interest. The Order directs the Administrative Law Judge to issue an initial decision within 210 days from the date of service of the Orders. (Rel. IA-3409; File No. 3-14894)

In the Matter of Marc Christopher Harmon

On May 29, 2012, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Notice of Hearing (Order) against Marc Christopher Harmon.

The Order alleges that on May 16, 2012, a final judgment was entered against Harmon, permanently enjoining him from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, in the civil action entitled Securities and Exchange Commission v. Jason George Rivera, Jr., et al., Civil Action Number 3:11-cv-04741-SI, in the United States District Court for the Northern District of California. The Order further alleges that the Commission’s complaint in the civil action alleged that during approximately October 2008 through May 2009, Harmon participated in a scheme that raised approximately $3.2 million from approximately 16 investors through fraudulent, unregistered sales of securities. The Order also alleges that during and as part of the conduct underlying the complaint, Harmon acted as an unregistered broker.

A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Harmon an opportunity to respond to these allegations, and to determine what sanctions, if any, are appropriate and in the public interest. As directed by the Commission, an administrative law judge shall issue an initial decision in this matter no later than 210 days from the date of service of the Order. (Rel. 34-67069; File No. 3-14896)

In the Matter of Jason George Rivera, Jr.

On May 29, 2012, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940 and Notice of Hearing (Order) against Jason George Rivera, Jr.

The Order alleges that on May 16, 2012, a final judgment was entered against Rivera, permanently enjoining him from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, in the civil action entitled Securities and Exchange Commission v. Jason George Rivera, Jr., et al., Civil Action Number 3:11-cv-04741-SI, in the United States District Court for the Northern District of California. The Order further alleges that the Commission’s complaint in the civil action alleged that during 2007 through 2010, Rivera, using two companies he controlled and operated as investment pools, raised nearly $8 million from over 35 investors through fraudulent, unregistered sales of securities. The Order also alleges that during and as part of the conduct underlying the complaint, Rivera acted as an investment adviser.

A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Rivera an opportunity to respond to these allegations, and to determine what sanctions, if any, are appropriate and in the public interest. As directed by the Commission, an administrative law judge shall issue an initial decision in this matter no later than 210 days from the date of service of the Order. (Rel. IA-3411; File No. 3-14897)

Securities and Exchange Commission Orders Hearing on Registration Suspension or Revocation Against Six Public Companies For Failure to Make Required Periodic Filings

Today the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of six companies for failure to make required periodic filings with the Commission:

Oklahoma Energy Corp. (OKOK)

OL Funding, Inc.

OmniSky Corp.

Orange County Ventures, Inc.

Percipio Biotherapeutics, Inc.

Priviam, Inc.

In this Order, the Division of Enforcement (Division) alleges that the six issuers are delinquent in their required periodic filings with the Commission.

In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the Administrative Law Judge will hear evidence from the Division and the Respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder, are true. The Administrative Law Judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these Respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-67072; File No. 3-14898)

SEC Charges Two Investment Advisers with Fraud

The Securities and Exchange Commission today charged Jorge Gomez, an investment adviser formerly located in Dallas, Texas and Mexico, with perpetrating a fraudulent scheme to misappropriate millions from an investment advisory client (“Client”). The SEC also has agreed to settle related charges against Roberto Aleph Espinosa, a former resident of Miami, Florida, who, in conjunction with Gomez, provided investment advisory and brokerage services to the Client.

The SEC’s complaint alleges that Gomez, age 42, the president of Atlantic International Capital LLC (“Atlantic”), misappropriated at least $4.3 million from his investment advisory client between September 2007 and December 2010. Gomez concealed his misappropriation by providing the client with fake account statements and securities certificates. Gomez also sent correspondence to the client misrepresenting, among other things, his ability to withdraw money from his account.

The SEC alleges, among other things, that Espinosa, age 37, the president of now defunct Aleph Consulting Group LLC (“Aleph”), a Florida corporation that served as investment manager to a hedge fund started by Espinosa, received, through Aleph, undisclosed retrocession fees related to the fund’s purchase of certain securities. The complaint also alleges that Espinosa forwarded to the foreign financial services firm holding the Client’s brokerage account scores of withdrawal requests signed by Gomez directing the Client’s funds to Gomez controlled accounts, while simultaneously failing to discuss Gomez’s depletion of the account with the Client in breach of his fiduciary duties.

The Commission’s complaint charges Gomez with violations of Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5(a), (b), and (c) thereunder; and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 (“Advisers Act”). The complaint charges Espinosa with violations of Section 15(a) of the Exchange Act and Sections 206(1), (2), and (4) of the Advisers Act and Rule 206(4)-8 thereunder. The Commission’s complaint alleges in the alternative that Gomez aided and abetted Atlantic’s Advisers Act violations and that Espinosa aided and abetted Aleph’s Advisers Act violations. The Commission is seeking permanent injunctions against Gomez for violating or aiding and abetting the violations of the above provisions of the securities laws, disgorgement of ill-gotten gains plus pre-judgment interest, and civil penalties. Espinosa has agreed to a settlement with the SEC, without admitting or denying the allegations in the complaint, that includes a permanent injunction against future violations of Exchange Act Section 15(a) and Advisers Act Sections 206(1), (2), and (4) and Rule 206(4)-8, disgorgement of $855,000 plus prejudgment interest of $34,822.15 and a one-time civil penalty of $130,000.

Court Enters Final Judgments Against New Hampshire Futures Day-Trading Business and Canadian Resident In Ponzi Scheme Case

The Securities and Exchange Commission announced today that, on May 24, 2012, the U.S. District Court for the District of New Hampshire entered final judgments by default against New Futures Trading International Corporation (“New Futures”), a New Hampshire business and Henry Roche, a Canadian resident who directed New Futures, in a Ponzi scheme action the Commission filed in November 2011. Among other things, the court ordered the parties to pay a total of over $2.8 million.

In its complaint, filed on November 16, 2011, the Commission alleged that Roche, through New Futures, had been engaged in an ongoing unregistered offering of securities in the United States through operations in New Hampshire and Ontario, Canada. The Commission alleged that, since December 2010, Roche had raised over $1.3 million from at least 14 investors in nine states through the offer and sale of high yield promissory notes purportedly yielding either 5-10% per month, or a 200% return within 14 months. According to the Commission’s complaint, Roche represented to some investors that funds supplied would be invested in bonds, Treasury notes and/or 10-year Treasury note futures contracts, and to others that the funds would be invested directly in New Futures, purportedly an on-line futures day-trading training business Roche was operating from Canada. The complaint alleged that, instead of using the funds for either purpose, Roche used approximately $937,000 provided by New Futures investors to make Ponzi “interest” payments to investors in prior Roche-controlled entities. According to the Commission’s complaint, Roche also misappropriated at least another $359,000 to support his lifestyle, to operate a horse breeding venture, and to buy horses. At the time the action was originally filed by the Commission, the court issued a temporary restraining order (later converted to a preliminary injunction) that, among other things, froze the assets of New Futures and Roche and prohibited them from continuing to solicit or accept investor funds.

The court, acting on the Commission’s motion for default judgments, entered final judgments: (1) imposing permanent injunctions against both New Futures and Roche enjoining them from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; (2) ordering them each to pay disgorgement of their ill-gotten gains in the amount of $1,242,972 plus prejudgment interest of $40,917.47; and (3) ordering Roche to pay a monetary penalty in the amount of $150,000 and New Futures to pay a monetary penalty in the amount of $150,000. [SEC v. New Futures Trading International Corporation and Henry Roche (United States District Court for the District of New Hampshire, Civil Action No. 11-CV-532-JL] (LR-22377)

SEC Obtains Dismissal of Complaint Without Prejudice Against Three Swiss Entities in Insider Trading Case

The Securities and Exchange Commission announced today that a federal court in New York granted its motion to dismiss without prejudice the Commission’s complaint against the defendants in a civil action alleging insider trading. On July 15, 2011, the Commission filed a complaint charging defendants Compania International Financiera S.A. (Compania), Coudree Capital Gestion S.A. (Coudree) and Chartwell Asset Management Services (Chartwell), all based in Switzerland, with insider trading. The complaint, as amended on January 13, 2012, alleged that each of the defendants violated Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder when they traded ahead of a July 11, 2011 public announcement that Swiss-based Lonza Group Ltd. would acquire Connecticut-based Arch Chemicals, Inc. through a tender offer.

The Commission filed papers with the court in February 2012 seeking to dismiss the complaint without prejudice as to defendants Compania and Coudree. Among other things, the Commission’s motion noted that dismissing the complaint without prejudice would “permit the full and complete investigation of the underlying facts by the Commission.” On May 22, 2012, the court granted the Commission’s motion and dismissed the complaint without prejudice against defendants Compania and Coudree. In granting the motion, the court cited, among other things, the Commission’s inability to obtain critical information during the discovery period, including problems with the discovery process caused in part by the conduct of defendants Compania and Coudree, and the court concluded that the dismissal without prejudice would be in the interest of justice. The court had previously dismissed the complaint without prejudice as to defendant Chartwell, on February 14, 2012, based on a stipulation by the parties.

Notice of Applications for Deregistration under the Investment Company Act of 1940

For the month of May 2012, a notice has been issued giving interested persons until June 19, 2012, to request a hearing on any of the following applications for an order under Section 8(f) of the Investment Company Act of 1940 declaring that the applicant has ceased to be an investment company:

SELF-REGULATORY ORGANIZATIONS

Designation of Longer Period For Commission Action on Proposed Rule Change

The Commission has designated a longer period for Commission action under Section 19(b)(2) of the Securities Exchange Act of 1934 on a proposed rule change (SR-FINRA-2012-021) filed by the Financial Industry Regulatory Authority, Inc. relating to post-trade transparency for agency pass-through mortgage-backed securities traded in specified pool transactions and SBA-backed asset-backed securities transactions. Publication is expected in the Federal Register during the week of May 28. (Rel. 34-67063)

Approval of Proposed Rule Change

The Commission granted approval of a proposed rule change (SR-MSRB-2012-05) submitted by the Municipal Securities Rulemaking Board pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 consisting of a restatement of an interpretive notice concerning the application of MSRB Rule G-17 to sophisticated municipal market professionals. Publication is expected in the Federal Register during the week of May 28. (Rel. 34-67064)

Immediate Effectiveness of Proposed Rule Change

A proposed rule change filed by Chicago Board Options Exchange, Incorporated to amend the Fees Schedule (SR-CBOE-2012-047) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of May 28. (Rel. 34-67065)

SECURITIES ACT REGISTRATIONS

The following registration statements have been filed with the SEC under the Securities Act of 1933. The reported information appears as follows: Form, Name, Address and Phone Number (if available) of the issuer of the security; Title and the number and/or face amount of the securities being offered; Name of the managing underwriter or depositor (if applicable); File number and date filed; Assigned Branch; and a designation if the statement is a New Issue.

Amendments to the Registrant's Code of Ethics, or Waiver of a Provision of the Code of Ethics

5.06

Change in Shell Company Status

6.01

ABS Informational and Computational Material.

6.02

Change of Servicer or Trustee.

6.03

Change in Credit Enhancement or Other External Support.

6.04

Failure to Make a Required Distribution.

6.05

Securities Act Updating Disclosure.

7.01

Regulation FD Disclosure

8.01

Other Events

9.01

Financial Statements and Exhibits

8-K reports may be viewed in person in the Commission's Public Reference Branch at 100 F Street, N.E., Washington, D.C. To obtain paper copies, please refer to information on the Commission's Web site at http://www.sec.gov/answers/publicdocs.htm. In most cases, you can view and download this information by using the search function located at http://www.sec.gov/edgar/searchedgar/companysearch.html.